Ironically, investors hoping to cash in on proposed tax breaks for dividends may do well by buying low-dividend growth stocks. Some companies are sitting on huge amounts of cash. If legislation is passed that would make it more tax-effective to distribute cash to shareholders, those companies’ dividends could go much higher, which probably would help the stock price.
Some technology, media, business service, and pharmaceutical companies may be in a position to increase their dividends, and possibly raise their stock price, if the tax law changes.
Microsoft is an obvious example of a cash-rich company that could boost its dividend; others include First Data Corp., which processes transactions for merchants, and pharmaceutical giant Pfizer.
